6 GOLDEN tips to help you create wealth

6 GOLDEN tips to help you create wealth

Investing in the stock market and deciding to buy a particular stock are two different decisions. The latter requires proper analysis

Equities have historically been the best performing asset class, and hence the best bet for wealth creation.

But deciding to invest directly in stock market and deciding which stocks to buy are two very different decisions. The first one is fairly easy and depends on your risk-appetite. The second one, however, is not that easy.

Since equities are the units of ownership of a company, the fate of an equity investor is directly linked to the company's performance.

So, it is important to invest in right companies which offer consistent growth opportunities. This calls for fundamental analysis, which is the backbone of investing.

6 GOLDEN tips to help you create wealth

Irrespective of the strength of the stock, it will get impacted by the overall macroeconomic scenario in the country like inflation, interest rates, liquidity, political stability, foreign flows and so on.

Global macroeconomic outlook also has a bearing on equity returns due to capital flows into equity markets.

The stock's performance also depends on the latest developments and industry outlook in terms of growth, demand-supply, regulatory changes amongst others.

One should know if a company is in a growing or saturated industry. Even weak stocks in a strong sector may give better returns than a good stock in a sector with weak fundamentals.

6 GOLDEN tips to help you create wealth

After having invested in the stock, it is important to keep a track of the developments on the above parameters. Active trading is not recommended. One should always invest with a long-term view.

However, if there is a structural shift in the underlying fundamentals and it is important to reassess the stock.

With some research on the above mentioned variables, an investor can reduce the risks inherent in equity investments.

Relying on advice from friends is not a good idea. It is necessary to do some groundwork yourself. Wealth creation is not just luck. A continuous learner can create great wealth by following a disciplined investment approach.